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Q&A: ARMC CFO discusses health care finance and state bailouts

With so much media discussion regarding the federal Affordable Care Act focused on enrollments and Medicare expansion, few have considered the myriad of other potentially redefining aspects of the health reform law.

One such aspect is the planned $18 billion in cuts to federal subsidies over the next six years to hospitals treating uninsured patients. With the law’s requirement that nearly all Americans must get health coverage and the expectation states would expand Medicaid coverage, many federal lawmakers consider the subsidies unnecessary.

However, the U.S. Supreme Court ruled in 2012 that the federal government lacked the authority to force states to expand Medicaid.

Georgia Gov. Nathan Deal and several other governors refused to expand Medicaid, saying it would drain state budgets.

But to help hospitals treating a large number of uninsured patients, the governor’s chief of staff, Chris Riley, recently announced Deal is considering a bailout.

Riley didn’t offer many details and failed to return phone messages left at his office in recent days. At the time he made the announcement, he did say Deal is considering everything from a one-time payment to an ongoing commitment.

ABH: Recently, Gov. Deal’s chief of staff, Chris Riley, told a Morris News Service reporter that the state might offer a bailout to hospitals losing federal subsidies due to the Affordable Care Act. Has anyone in state government contacted ARMC offering details of such a bailout?

Cook: Not to my knowledge.

ABH: As a nonprofit hospital, how much funding does ARMC receive each year in federal subsidies to treat uninsured patients and how much does it stand to lose to cuts?

Cook: Based on the disproportionate share of uncompensated care provided by our facility we are eligible for supplemental payments through the Medicaid program supported by federal matching dollars. These payments are approximately $7 million per year. On a cost basis, uncompensated care provided by ARMC exceeds $50 million per year.

ABH: Does the blame for these cuts lie solely with the ACA and federal lawmakers?

Cook: Placing blame is not productive. We remain focused on solutions to an ever-changing healthcare environment. I respect healthcare economics are very complicated. We fully support pricing transparency and reducing costs in the healthcare industry.

ABH: How large a bailout would ARMC need from the state to make up for the loss in subsidies and to fully compensate the hospital for care offered to uninsured patients?

Cook: I would not be prepared to provide an estimate at this time. Margins in the commercial arena are also being squeezed while patient responsibilities are escalating rapidly. As a result, cash flow for hospitals to afford the latest technological advances and to maintain facilities to the highest standards is increasingly hard to generate.

ABH: Without a bailout, what can hospitals do to overcome the loss in subsidies?

Cook: ARMC continually evaluates cost structure and is on a perpetual search for waste (i.e. eliminating redundant tasks, increasing automation in processes, etc.) in the system. Without adequate funding, service lines will have to be evaluated more closely to ensure all offerings fully accrue towards our mission of improving the health and lives of those we touch.

ABH: Would expanding Medicaid in the state help or hurt?

Cook: Broadening coverage would be beneficial. We continue to evaluate the myriad of state models being developed across the country and are confident a best practice will come to light for the good of all communities.

ABH: Do you agree with the governor’s assessment that expanding Medicaid would add more than $600 per Georgia taxpayer to the state budget?

Cook: We have not analyzed the calculation, but were not surprised by the quote.